Informality, Labor Market Dynamics, and Business Cycles in North Africa

IMF Working Papers, September 8, 2023

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Canonical URL: Informality, Labor Market Dynamics, and Business Cycles in North Africa

Title: Informality, Labor Market Dynamics, and Business Cycles in North Africa
Authors: Olivier Bizimana, Shant Arzoumanian
Date: September 8, 2023
Publication: IMF Working Papers; Working Paper No. 2023/182; Issue: 182; Volume: 2023
Pages: 36
DOI: https://doi.org/10.5089/9798400250583.001
Stock No: WPIEA2023182
ISBN: 9798400250583
ISSN: 1018-5941
Citation format example in source: Olivier Bizimana, and Shant Arzoumanian. "Informality, Labor Market Dynamics, and Business Cycles in North Africa", IMF Working Papers 2023, 182 (2023), accessed 9/16/2026, https://doi.org/10.5089/9798400250583.001
Subjects: Economic growth; Economic recession; Employment; Informal employment; Labor; Labor force participation; Labor markets
Keywords: Business cycles; business cycles in North Africa; Economic recession; Employment; employment informality; Informal employment; Informality; informality economy; Labor force participation; labor market dynamics; Labor Markets; law coefficients from panel regression; North Africa; Okun’s Law; product market rigidity

Employment informality is widespread across North Africa.
The response of labor markets to output fluctuations is more muted in countries with higher informality levels, like the North African economies.
Informal employment is confirmed to be countercyclical and acts as a buffer during economic downturns in countries with relatively higher informality.
During the 2020 pandemic recession, informal employment contracted sharply in high informality economies, indicating it did not play its traditional countercyclical role in that episode.
Employment informality tends to fall modestly or increase during economic upturns, including the post-pandemic recovery.
The post-pandemic pattern presages the persistence of a large informal sector in the post-covid era in medium- and high-informality countries.

Labor market adjustments over the business cycle behave differently in higher-informality environments: overall labor responses to output are more muted compared with lower-informality settings.
The usual buffering role of informal employment in downturns can fail under extreme shocks, as observed in the 2020 pandemic recession for high-informality economies.
The observed modest declines or increases in informality during recoveries imply structural persistence of informality following the pandemic in medium- and high-informality countries.

IMF Working Paper No. 2023/182 — Olivier Bizimana and Shant Arzoumanian (September 8, 2023).